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July 8, 2013

Equity, Bond Flows Bounce Back in Early July

New views on quantitative easing bring investors back into the markets, EPFR Global reports

During the first week of July, investors changed their tune on where central-bank policymaking is heading and poured nearly $6 billion into equity funds and over $2 billion into bond funds, according to the EPFR Global.

This was quite a turn for fund flows, which had seen nearly $58 billion in redemptions from bond-funds alone over the past four weeks, according to EPFR Global, which released its latest report on Friday. (The research firm tracks almost 50,000 funds and $19.6 trillion in assets worldwide.)

Investors seemed to be responding to remarks made by central bankers in the Europe, which reflected comments made by members of the Federal Reserve concerning the less-than-imminent death of quantitative easing.

U.S.- and Europe-based funds accounted for most inflows with investors positioning themselves ahead of an earnings season that, at least for exporters, should be a good one, the research group says.

While Canada and Australia continued to experience record outflows, Germany, Switzerland and UK equity funds took in over $100 million; funds focused on Italy, Spain and Sweden also recording solid inflows. “Investors largely shrugged off data showing unemployment in the European Union holding at record levels and fears the Portuguese government will collapse, taking its commitment to austerity measures with it, with daily data only turning negative on July 3,” EPFR explained.

In Japan, equity funds hit a six-week high. With renewed turmoil in Egypt, dropping oil production in Mexico, Venezuela and Nigeria, energy-sector funds saw inflows top $2 billion for the first time since early 2011.

“Seven of the other 10 major groups tracked by EPFR Global also posted inflows as receding fears about the pace of monetary tightening and a focus on the upcoming 2Q13 earnings season attracted some fresh money,” the group shared.

Emerging-markets bond funds, however, suffered net redemptions for the sixth-straight week, though the level of outflows was just a-fifth of the previous week’s record-setting amount.

Emerging-market corporate bond funds, though, had outflows hit their highest weekly total since the start of the current financial crisis.

Bullish on U.S. Investments

In late June, an online survey of investors found that most, 63%, are bullish about the prospects for domestic stocks in the third quarter of 2013, according to the Tokyo-based Monex Group. This is up from 57% in March and 43% in December 2012.

“This surprising result flies in the face of broad pessimism about the outlook for global equities, as well as clear concern about how growing budget deficits and other structural problems could affect the U.S. economy going forward,” the online brokerage group explained in a press release.

Also, some 53% of investors using Monex’ broker-dealer said they are bullish about the U.S. dollar vs. 49% in March and 35% in December.

U.S. investors, however, are still downbeat about global equities, with 40% predicting they would decline in the third quarter of 2013.

"The survey results suggest that concerns about global economic challenges haven't dampened U.S. investors' expectations for domestic stocks and the U.S. dollar," said Salomon Sredni, CEO of TradeStation Group, Inc. and COO of Monex Group, in a press release.

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